Can masters and mistresses of the corporate universe connect with mere mortals?

Updated Wednesday 8th July 2009

During the recent recession, have managers failed to communicate and consult with their workforce?

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A business situation.

One effect of the global recession is that employees are being asked to work short-time or take unpaid leave, rather than being made redundant. Recent examples from the UK include Honda and British Airways, among others.

The management of companies who undertake this response justify their actions on the basis that they cut their workforce too deeply in the last recession, thereby constraining their ability to exploit the following upturn, when it occurred. This strategy is expressed in terms of being a win-win situation: management cuts costs and employees get to keep their jobs.

It is being reported in fairly uncritical terms, like much of the media coverage of the corporate sector which had tended to lionise the masters and mistresses of its universe before the financial and economic crisis. It could be claimed that this helped create an environment in which "business as usual" (despite a broken model) can be resumed in the upturn. Interviewing a few "business leaders" appears to conform to the philosopher Betrand Russell’s epigram “personal experience is a bad basis for science” and does not greatly contribute to a public understanding of and education in complex business and management issues.

The key question is, whether this short-term response is the basis of a sustainable strategy and whether this is sector-specific or a general solution to the challenge of controlling employment costs.

At the aggregate level of the economy, this is not sustainable as lower incomes lead to lower demand, lower output and slower growth. At the level of the individual company, there are some more fundamental issues at play, particularly for managers in British-owned companies. Underlying this key question is a number of subsidiary ones:

How does senior management stay in touch with its workforce, particularly in the threatening environment of a recession?

Faced with the prospect of short-time working and unpaid leave, have the workers been asked what they think?

Is consultation with the workforce a didactic (“we’ve told you what we are going to do, so you have been consulted”) or an interactive process?

Talking to the staff appears to be an obvious thing to do but, in the absence of formal procedures and channels in which real dialogue takes place, one has to take management’s word for it that their talking is effective. Organisations that are smart at working are far more likely to be productive and sustainable, as the recent Chartered Institute of Personnel and Development (CIPD) report, Smart working: The impact of work organisation and job design, demonstrates. Among its conclusions is that process and management innovation are key components of productivity improvements. Yet, as numerous studies over many years have shown, there is a UK productivity problem. British-owned firms are less productive than foreign-owned ones operating in the UK.

One conclusion is that non-UK owned firms work smarter and view their workforces as a key asset and not a cost liability. Another is that the relationship that Masters and Mistresses of the Corporate Universe have with mere mortals may need to be changed or even reversed. If there is such a thing as the knowledge economy, this appears to be the bottom line for a restructured business world that is less volatile and sustainable in the longer term.

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What constitutes a recession? To find out, Ione Mako talks to Malcolm Prowle, visiting professor at Centre for Financial Management of the Open University Business School and Professor of Business Performance at Nottingham Business School.